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  • as we've mentioned before one of the other competencies

  • marketers need is market sensing or the ability to sense

  • the market and we indicated there were two

  • sub competencies within that -- environmental analysis

  • and researching consumer behavior. today we're going to focus

  • on environmental analysis overview

  • and then also focus more specifically

  • on the competition aspect of the environmental analysis

  • so when we talked

  • last time we

  • focused on defining marketing

  • as something that creates value

  • and relationships to meet customer needs.

  • we indicated that a key aspect of marketing

  • was exchange between a customer

  • and organization in the form of the marketing mix which involves the product

  • the price the place or distribution

  • and the promotion. we also differentiated between

  • marketing and promotion, advertising and selling.

  • while advertising and selling

  • are part of promotion which is part of marketing

  • I think you can see how marketing is much

  • more and much broader than just promotion

  • or just advertising and selling. i

  • want to focus today on things going on

  • outside the marketing organization

  • that we would want to sense or continuously scan and analyze.

  • and so the marketing environment is comprised of several forces

  • competitive and economic forces

  • regulatory legal and political forces

  • technological forces, social

  • cultural and demographic forces and also the natural environment.

  • so today we're going to focus pretty much

  • on explaining the importance of

  • analyzing the competitor environment

  • for your organization now.

  • its interesting because some people might think

  • their product to so unique that they don't have any competition

  • and that's pretty much is an inaccurate statement. almost

  • every product has some form a competition

  • which we would define as a substitute

  • or similar products what they would buy instead

  • if they didn't have your product so

  • Shocker indicate that competition

  • is a matter of decree rather than

  • dichotomy in other words, instead of yes

  • are no do you have competition, pretty much

  • assume that you do but what the degree or type of competition

  • that you have. I'm also noting here

  • a couple additional information sources

  • for this concept. so let's look

  • at the different degrees or

  • levels of competition. the first type

  • would be product form

  • or brand competition. the second

  • type would be product category competition.

  • another type would be generic competition

  • and the fourth type would be a total budget

  • competitor. so let's describe the difference

  • by using the product category

  • soft drinks or pop or cola

  • depending upon what area in the country you are from.

  • in product form

  • or brand competition your competitors could come from the same product

  • category

  • so in this case we are talking about two

  • soft-drink that have similar features

  • in this case to soft drinks

  • that are both cola so coca-cola and Pepsi

  • would be considered brand or product

  • form competitors. now even if you don't have a product

  • in the same product category with similar features

  • you might have a product in the same product category,

  • in our example soft-drink, that have different

  • features in this case coca-cola

  • and Mountain Dew. we would call coca-cola and Mountain Dew

  • product category competitors because they're in the same product category

  • even though they have different features. even if you don't have any product

  • category competitors, in other words there's

  • nothing in your same product category

  • there might be something in a

  • different product category that meets the same

  • need in this case both coca-cola

  • and bottled water. while they're not both

  • soft-drink they do both satisfy

  • thirst so coca-cola and bottled water

  • would represent what we would call generic competitors.

  • even if you don't have something

  • that satisfies the same need every product

  • out there competes for the consumer dollar

  • and so therefore because consumers

  • only have a limited amount of what's called discretionary

  • income. every product basically

  • competes for that dollar so in this case

  • if you were both hungry and thirsty

  • and you went to the vending machine you would have to choose

  • between coca-cola and skittles even though they don't meet the same basic

  • need. even though

  • they're not the same product category

  • they are still what we would call budget competitors.

  • let's illustrate Shocker's quote even more.

  • competition is a matter of degree --

  • brand product category generic

  • -- rather than a simple

  • yes or no. whether or not you have competition.

  • it is very important

  • is to understand the industry in which you operate

  • and so most industries

  • will have what would be called a trade association

  • -- it's a collection of member

  • competitors in a product category.

  • we're gonna look a little bit at the

  • International Bottled water Association

  • in a minute. let's hold off on that concept --

  • trade associations until after we discuss

  • another concept in terms of industry competition --

  • another concept would be

  • how many competitors you have in your industry

  • if you are the only competitor in your industry

  • you have what's called a monopoly.

  • if there are only a few competitors

  • in your industry you would operate in what's called

  • an oligopoly. if you have many competitors

  • in your industry and therefore they're all trying to make

  • their product appear different by various features and benefits

  • you would operate what's called monopolistic

  • competition. there's also a fourth

  • level competition within the industry called pure competition.

  • honestly it it rarely exists because

  • there are very large number of competitors with standardized products

  • and so the only way they

  • really compete is based upon price.

  • an exaqmple here might be most agricultural products

  • but most products that are marketed we try

  • not to be standardized. in other words they try to make

  • their product special

  • or differentiated from their competitors

  • and therefore trying to convince people to buy their product

  • versus a competitor's product. one thing I want to do

  • at this point is re visit this concept of

  • trade associations and I'm going to visit the

  • International Bottled Water Association.

  • later you'll be doing a primary and secondary research project

  • based upon information that you can get

  • from the bottled water Association. one of the things that is

  • often available from a trade association

  • are statistics about your industry

  • and I'm focusing here on

  • something from the bottled water Association industry

  • from 2011 and one of the things they're looking at or

  • types of data that you might get here would be to

  • look at the demand for your

  • product category over time. and you can see here in the bottle

  • Water Association that after 2007,

  • in 20008 and 2009,

  • were there was a decline in the

  • consumption of bottled water

  • per capita in terms of gallons. it's picking up again in 10 and 11

  • and part of the reason for that to happen has to do with the topic

  • at this lecture series --

  • things that are happening in the external

  • environment. and we can discuss sales more at a later time.

  • it's important that you understand

  • your industry and your competitive industry.

  • one other thing that we want to discuss when we talk about

  • an industry is the potential size

  • of your market and also your share

  • of that particular market so let's move on to those concepts.

  • first of all let's discuss the concept of

  • market potential or

  • industry potential. it is the total amount

  • of a given product category-- whether it be

  • bottled water soft-drink or another product category--

  • it's for example the total amount

  • of a given product category that can be

  • sold in a given time period

  • generally we would look at a year in a given

  • geographic area. so it's interesting

  • to look at the market or industry

  • potential of e-cigarettes and the growth in that market

  • from 2007 until 2013.

  • interestingly the market more than doubled

  • between 2012 and 2013

  • and so what causes the market potential

  • for a product category to grow?

  • and generally speaking the

  • answer to that would be the various forces

  • in the marketing environment that we talked about earlier.

  • those competitive economic regulatory

  • technological social and cultural forces

  • or even changes in the natural environment.

  • so let's apply that concept to

  • this e-cigarette market what are some of the reasons

  • for e-cigarette growth? well first of all social

  • I think most

  • understand now that it's considered

  • socially unacceptable to smoke

  • in many environments because are the health

  • reasons and especially because of the second hand smoke

  • concerns in addition to just how people in our society

  • and culture feel about traditional smoking.

  • there's also been new regulatory

  • influences or forces that

  • have affected the demand for regular cigarettes

  • or e-cigarettes.

  • in many areas there have been bans against smoking

  • indoors. additionally

  • there have been economic influences. since the economic recession of 2008

  • since the increasing cost of traditional cigarettes and the taxation of

  • those items it has become increasingly

  • expensive to smoke and

  • consumers only have so much discretionary

  • income. there've also been

  • technological influences on the cigarette market.

  • with the Advent of New

  • technology for smoking we've seen a tremendous growth

  • in that market.so I'm not suggesting that

  • e-cigarettes are something that you should pursue or should not pursue --

  • i don't want to get into that -- but I wanted to use that particular market

  • to illustrate this concept about growth

  • in market potential -- the total amount of a given product category

  • that can be sold in a given time frame in a given

  • geographic area. another way to look at

  • market potential is to look at the

  • what's called the primary demand for a product category.

  • so when we talk about primary demand we're talking about the demand

  • for a product category regardless

  • of the brand. with e-cigarette

  • let's illustrate

  • a new concept and that is that market share

  • and the market share would be the ratio of

  • your brand

  • or company to sales of

  • all that particular product category

  • industry-wide. so market share

  • is a ratio of the sales of your brand

  • compared to the market potential

  • or the primary market --if we looked at the e-cigarette market

  • for example you can see that 61 percent

  • of the market potential for that

  • product category is held by

  • one competitor and if you look at the additional

  • top two competitors you'll see that

  • almost 75 percent of the E cigarette market

  • is controlled by 3 brands

  • that represents each of these three brands'

  • market share -- the ratio of their sales

  • to industry-wide sales.

  • we would call that demand selective

  • demand or demand for a specific

  • Brand. one of the things

  • that you're faced with often as a marketer

  • is the concept and how do we sell more?

  • how do we help our company to continue to grow

  • by selling more? and we have to think of that

  • more thoroughly than just saying

  • okay I wanna sell more let's run an ad. it's not that simple.

  • one concept of selling more

  • maintains that the market potential or the primary demand